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Groupon Buys LivingSocial, a Rival Once Valued at $6B

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Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#51

Post by epa »

jacquesm wrote: post #16
downandout wrote: post #15

Does anyone know what the threshold for an "immaterial" transaction is in the case of Groupon? I'm trying to at least get a sense of the price.

There is no absolute threshold it is more a matter of whether or not you could argue that your decisions would have been different had you known about it. That leaves a lot of legal wiggle room.

If any ratio below is above 10%, you may consider it material

1) acquired assets / groupon total assets

2) acquiree pre tax income / groupon pre tax income

3) purchase price / total assets

Groupon has 1.7B in total assets. By looking at criteria 3, this means the purchase would have been at maximum 20% (340M - Wont get into reasons why we use 20%, but this is the ceiling) or less.

The price was likely in the 20-75M range, if living social contributed to less than 10% of the net loss of groupon (100M), and their assets were under 50M (likely).

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#52

Post by fspeech »

unclebucknasty wrote: post #50
dannylandau wrote: post #37

Daily Deals are great for one type of business -- Dental offices! I used them a few times for to get discounts on cleaning. The incentive to bring new customers by offering steep discounts is definitely worth it for those type of vendors.

> I used them a few times > The incentive to bring new customers by offering steep discounts is definitely worth it for those type of vendors. But, it sounds like you either a.) Kept getting steep discounts with multiple Groupons for the same dentist or b.) Kept hopping to whichever dentist was offering a steeply discounted Groupon. Neither of these is good for the dentists. Or did I miss the sarcasm?

Dentists can compensate for the loss by getting customers who need higher valued services like cavity filling or crowns. If your dentist tells you that you need fillings during the exam you are unlikely to refuse and shop around for other dentists.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#53

Post by dragonwriter »

downandout wrote: post #22
dmerrick wrote: post #17

Back in 2010 I worked at a startup that ended up pivoting to a regional Groupon clone. It seemed like a good idea at the time, but the company ended up going under a year later. What I remember most vividly was trying to come up with a good name. LivingSocial was starting to get traction and we wanted to differentiate ourselves from them. The conversation went like: Boss: What's the opposite of LivingSocial? Me: I du…

I'm curious how you could possibly lose money in a business like this. Sure there is a sales cost, but there are alternatives to having a full-time sales force. I'd have tracked every company that has used Groupon/LivingSocial and figured out a way to electronically contact or advertise to as many of them as possible for very little cost (LinkedIn/Facebook enable advertising to employees at specific companies, for ex…

> I'm curious how you could possibly lose money in a business like this.

Given all the stories that were going around for a long time about how offering through businesses like this was a losing proposition for most customers (really independent of the truth of those stories), I'm not surprised that there could be trouble making a profit in it.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#54

Post by unclebucknasty »

fspeech wrote: post #52
unclebucknasty wrote: post #50

Earlier quoted context omitted.

> I used them a few times > The incentive to bring new customers by offering steep discounts is definitely worth it for those type of vendors. But, it sounds like you either a.) Kept getting steep discounts with multiple Groupons for the same dentist or b.) Kept hopping to whichever dentist was offering a steeply discounted Groupon. Neither of these is good for the dentists. Or did I miss the sarcasm?

Dentists can compensate for the loss by getting customers who need higher valued services like cavity filling or crowns. If your dentist tells you that you need fillings during the exam you are unlikely to refuse and shop around for other dentists.

>you are unlikely to refuse and shop around for other dentists.

Sure I am, if money is an issue. From [0]:

>...many uninsured individuals rely on health-related deals from Groupon...to lower their healthcare costs. This may mean they’ll visit a different doctor or dentist each time as they find new coupons. This doesn’t provide much of an ROI on the initial discount offered, and it also lowers the quality of care...

Sounds more like the OP's described use.

>Groupon seems to work best for large, one-time procedures on new patients and not counting on them returning to your practice in order to make up the initial loss.

Sounds unlike the OP's described use.

[0] https://www.patientpop.com/blog/marketing/groupons-really-at...

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#55

Post by monochr »

ThrustVectoring wrote: post #40
twblalock wrote: post #35

Earlier quoted context omitted.

Dealing with small businesses is a total pain. Dealing with thousands of them is a major challenge for any business. Many small businesses don't adhere to professional norms of communication, negotiation, payment, etc -- that's not a big surprise, considering that many of them are owned by people without a lot of background in big business. The amount of time put into each deal is very high compared to the money you…

>You can make millions dealing with a small handful of enterprise companies, or you can try to make the same amount of money by dealing with hundreds or thousands of small businesses. This is burying the lede, IMO. Your sales structure should either be set up to catch shrimp or whales. You can have a product that sells itself and provide it cheaply - say, a smartphone app that summons a car to get you where you want…

The problem is that small businesses are salmon.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#56

Post by [deleted] »

ThrustVectoring wrote: post #40
twblalock wrote: post #35

Earlier quoted context omitted.

Dealing with small businesses is a total pain. Dealing with thousands of them is a major challenge for any business. Many small businesses don't adhere to professional norms of communication, negotiation, payment, etc -- that's not a big surprise, considering that many of them are owned by people without a lot of background in big business. The amount of time put into each deal is very high compared to the money you…

>You can make millions dealing with a small handful of enterprise companies, or you can try to make the same amount of money by dealing with hundreds or thousands of small businesses. This is burying the lede, IMO. Your sales structure should either be set up to catch shrimp or whales. You can have a product that sells itself and provide it cheaply - say, a smartphone app that summons a car to get you where you want…

[deleted]

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#58

Post by test1235 »

ThrustVectoring wrote: post #40
twblalock wrote: post #35

Earlier quoted context omitted.

Dealing with small businesses is a total pain. Dealing with thousands of them is a major challenge for any business. Many small businesses don't adhere to professional norms of communication, negotiation, payment, etc -- that's not a big surprise, considering that many of them are owned by people without a lot of background in big business. The amount of time put into each deal is very high compared to the money you…

>You can make millions dealing with a small handful of enterprise companies, or you can try to make the same amount of money by dealing with hundreds or thousands of small businesses. This is burying the lede, IMO. Your sales structure should either be set up to catch shrimp or whales. You can have a product that sells itself and provide it cheaply - say, a smartphone app that summons a car to get you where you want…

>Or you can have a product that takes a full-time professional sales force

This is Just-Eat's model - they have an army of sales people in every country they operate, pitching to the local food places in their area.

Re: Groupon Buys LivingSocial, a Rival Once Valued at $6B

#59

Post by qwrusz »

While Groupon is not exactly known for their financial filings accuracy. This acquisition is weirder than usual. There seems to be no official press announcement instead Groupon added basically just this one line in their 20-page long 3rd quarter earnings press release:

"On October 24, 2016, Groupon entered into an agreement to acquire all of the outstanding shares of LivingSocial, Inc. The acquisition is expected to close by early November 2016, subject to satisfaction of customary closing conditions. The acquisition consideration is not material."

For those comments questioning the "not material" part. I agree this looks like a potential legit issue: The price paid is probably somewhere in the 8 figures. But regardless of price, Groupon is a small company that doesn't make any money (they just announced they lost $36 million last quarter alone), so even a small purchase price, not to mention LivingSocial's future expenses, can be very material.

But more important than a debate over acquisition details and what is "material": Groupon management have been accused in multiple different lawsuits in recent years for making untrue statements or omissions of material facts. And they lose/settle for millions of dollars.

Innocent until proven guilty but if one reads further down to management's "Outlook" section of the press release it is very odd to see LivingSocial mentioned here:

"Outlook: Groupon's outlook for 2016 reflects current foreign exchange rates, as well as expected marketing investments, stabilizing trends in Shopping, the acquisition of LivingSocial, potential disruption related to country exits...Groupon is raising its revenue guidance range...and narrowing its expected 2016 Adjusted EBITDA range to between $150mm and $165mm"

If something is not material then how or why is it one of 6 things listed as reflected in the company's outlook??? Why even bring it up again?

Things that have an effect or get reflected in a company's outlook and guidance is material. Even in the most generous definition of material this is material.

I am not saying Groupon needed to disclose price paid or give a full biz synergy plan. But what is LivingSocial? Is it a going concern? Is this accretive or dilutive? Asset or liability?

This acquisition deserves more information than was provided and should not have been labeled as "not material". The stock's AH 10% drop feels very material to investors.

Groupon's 3Q2016 Press Release: http://investor.groupon.com/releasedetail.cfm?releaseid=9956...

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